Ways to help cover your mortgage repayments in retirement
What if you still have a mortgage when you retire? This is becoming more of a reality with a recent report showing that the number of homeowners over the age of 65 still with a mortgage has trebled between 2002 and 2015 (from 4% to 12%).
That number is expected to keep rising.
In my previous article, I spoke about negotiating the loan term while still in the workforce—to reduce the weekly loan repayment. In this article, I have a couple of tips to help come up with the cash to pay for the loan.
It’s by using the home or, more importantly, spare space in the home.
My partner and I recently returned from a short trip to Hobart and, rather than staying in a hotel, we opted for an Airbnb. It was a two-bedroom extension the owners had built for their kids, who have now moved out.
As a family of three, we happily paid $420 for three nights’ accommodation. We had access to a full kitchen for preparing meals and even a washing machine. By comparison, we would have paid around 20% more for a place half the size if we’d stayed in a nearby hotel.
It was a win for us and for the owners—in fact, the Airbnb is a big win for the owners. A quick check of their guestbook showed that for the last 3 months the property had been occupied for all except a few days.
I did some quick calculations:
- Suppose the occupancy rate for the year was 300 days.
- And, for ease of calculation, suppose the owners made $100 each day it was occupied (this allows for the costs of electricity, water, cleaning, and the milk and eggs provided).
- That means that the couple who hosted us have a property generating $30,000 in income each year.
Of course, not everyone has a spare two bedrooms, but if you had a single room, turning it into an Airbnb could easily earn an additional $8,000-$10,000 annually.
As a bonus, you can create an Airbnb account with an embedded link. When your subscribers click the link and join the site, you’ll get a referral fee when they stay with Airbnb for the first time.
Airbnb isn’t the only option. You might also look at taking in an international student as a boarder (I suggest an international student because they’ll already have been vetted by the university they’re attending).
This option typically earns a host family $150-$250 a week.
Both options will take some initial adjustments, but they also provide a wonderful opportunity to interact with people while solving the challenge of meeting the mortgage repayment.
Nathan Massie is a mortgage broker and director of Sprint Finance.
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